Question UK Non-Dom resident + remittance basis taxation

[atd]

Hello everybody,

I'm currently a tax resident (non-citizen) in Germany (for the past 3 years) and plan on changing my residency as I expect German-sourced payouts in the next 3 years, as well as capital gains from my overseas investments.

I've considered several options:

1. Dubai (least favourable, although taxes are 0%)
2. UK non-dom + remittance based regime (most favourable, as my wife is American)
3. Portugal NHR program (capital gains are likely to be taxed at 28%)
4. Italy (lump sum of 100,000 EUR per year)

For now, I lean towards UK.
Read several guides, including:

• https://assets.publishing.service.g.../uploads/attachment_data/file/415143/RDR1.pdf
• https://assets.publishing.service.g...led_uk_taxpayers_Supporting_Documentation.pdf
• https://www.pwc.com/gx/en/services/...e-to-the-uk-a-guide-for-inbound-assignees.pdf

Lots of questions remain though.
I'd appreciate any help.


1. Clean capital - does it have to be cash only? Or can it be stocks portfolio, where its total value will be taken into account on the day I become a resident?

2. Are there any ways to increase/balloon clean capital? I have a stocks portfolio with a gain, which I'd rather not sell, some loans to 3d parties (individuals and companies).

3. I read that several accounts are needed (3 minimum, ideally 4):

• UK account for spending and UK-sourced income (essentially, an account where I remit clean capital)
• Foreign income account in an offshore bank (an account, where I get my salary and bonuses)
• Capital gains account in an offshore bank (an account, where I deposit proceeds from my brokerage account from buying/selling securities)
• Dividends account (an account to get all the dividends paid)

What is the reason to have separate accounts for capital gains and dividends? Why not one?

4. If I keep gains in my brokerage account and do not distribute it, am I obligated to report it in my tax filings?
Am I obligated to file tax returns on any foreign income unless it's remitted to the UK?

5. I do own an SPF entity in Luxembourg for investing purposes, however, it seems like it does not make sense to keep it as I can open an offshore brokerage account with, say, Saxo Bank?

6. I fly a lot. If I buy tickets from and to UK using my Lufthansa (or other airlines) miles or cash from overseas salary, is it considered a remittance? And if airline is British Airways?

7. Can clean capital be used to buy assets, so it's not sitting idle? What's the best way to put clean capital to work?

8. I work as CEO in a foreign company. We use slack/google meet a lot. I've issued a PoA for my deputy, he handles day-to-day operations. How to avoid creating permanent establishment and UK income tax on my salary?

9. Can I use previously issued loans to companies and individuals to replenish my clean capital after becoming a UK-resident?

10. There is a way to claim split year, but since I still own home overseas, not working in the UK company, my wife is not a UK resident, I can not claim it. Would my best bet be to arrive at the beginning of a tax year? (April 6th).

11. Can I spend cash gifts from parents tax-free in the UK?

I'd appreciate any help from UK-residents who had previous experience in this.
Apologies for the long list

 

[Jmeery1]

Not an expert, but here are some thoughts:

1. Clean capital - does it have to be cash only? Or can it be stocks portfolio, where its total value will be taken into account on the day I become a resident?

Cash only. I imagine for stocks listed in the UK or brought into the UK as your assets (ie in a UK broker or liquidated and funds brought into the UK), the value would be taken from when you acquired them (not when you became resident). So for stocks, I would sell the stocks then buy them back before becoming resident, IF they are going to be UK taxable (assuming you can do so somewhere that has lower CGT than the UK).

2. Are there any ways to increase/balloon clean capital? I have a stocks portfolio with a gain, which I'd rather not sell, some loans to 3d parties (individuals and companies).

Pretty sure that loan notes can be brought into the UK, so when the loan capital is repaid to you, they would not be taxable. There would likely be conditions on that though, so I'd check with a UK accountant. The interest would probably be taxable though (if it was remitted)

3. I read that several accounts are needed (3 minimum, ideally 4):

• UK account for spending and UK-sourced income (essentially, an account where I remit clean capital)
• Foreign income account in an offshore bank (an account, where I get my salary and bonuses)
• Capital gains account in an offshore bank (an account, where I deposit proceeds from my brokerage account from buying/selling securities)
• Dividends account (an account to get all the dividends paid)

What is the reason to have separate accounts for capital gains and dividends? Why not one?

It's better to have multiple accounts because each category of clean capital, income, capital gains and dividends is taxed differently if remitted into the UK. So if you mix up the capital, you'll probably get taxed at the higher rate.

4. If I keep gains in my brokerage account and do not distribute it, am I obligated to report it in my tax filings?

Pretty sure you are supposed to report the gain regardless of whether it is remitted or not remitted.

Am I obligated to file tax returns on any foreign income unless it's remitted to the UK?

Theoretically, yes you have to declare all income to the HMRC, but you don't pay tax on what is not considered 'remitted'

5. I do own an SPF entity in Luxembourg for investing purposes, however, it seems like it does not make sense to keep it as I can open an offshore brokerage account with, say, Saxo Bank?

Beward the concept of Central Management meaning that the tax man says you are running your Lux entity in the UK. As a non-dom you are better off holding assets in your own name if possible.

6. I fly a lot. If I buy tickets from and to UK using my Lufthansa (or other airlines) miles or cash from overseas salary, is it considered a remittance? And if airline is British Airways?

Yes, if you are flying and out of the UK, it will be a remittance

7. Can clean capital be used to buy assets, so it's not sitting idle? What's the best way to put clean capital to work?

Yes, but the gains/interest would become taxable in the UK then. You have to weigh up is it better to keep the money in the UK earning nothing (as cash), or leave it outside of the UK and then pay tax on the gains when you bring funds into the UK.

8. I work as CEO in a foreign company. We use slack/google meet a lot. I've issued a PoA for my deputy, he handles day-to-day operations. How to avoid creating permanent establishment and UK income tax on my salary?

Doubtful you can as a UK resident. You would need to lose the CEO title and become a passive shareholder that does not attend board meetings or issue any instructions whilst in the UK - and convince HMRC of that too. If you must try to do that, you'd want to have lots of meetings outside of the UK and retain records that show you do all your work outside, and none inside.

9. Can I use previously issued loans to companies and individuals to replenish my clean capital after becoming a UK-resident?

I believe so, but I'd check the requirements for the loans to confirm how to do it.

10. There is a way to claim split year, but since I still own home overseas, not working in the UK company, my wife is not a UK resident, I can not claim it. Would my best bet be to arrive at the beginning of a tax year? (April 6th).

Yes. I wouldn't arrive mid tax year, and would try to ensure I only had one tax residence, not two.

11. Can I spend cash gifts from parents tax-free in the UK?

Pretty sure you can. However, they would be subject to IHT (so make sure your parent who gifts to you stays alive for at least 7 years after the gift or you'd theoretically be liable for IHT in the UK.) Also, make sure you keep good records that they are a gift and not income (ie draft up a Deed of Gift).

Good luck! I'm not a professional, just a wannabe non-dom, so f anyone knows different to what I've said above, I'd appreciate you letting me know where I'm wrong.